POSTED: 1:30 a.m. HST, Nov 2, 2012
Retail guru Glenn Kaya brought GEM to Hawaii in 1958. A lot of people think it was local, but it started in Denver in 1957, Kaya said. GEM stood for Government Employees Mutual, and you had to be a member to come into the store.
"The idea was that membership caused a sense of belonging," Kaya recalls. "With membership we knew who our customers were and where they lived. Our marketing was direct mailing to our members."
Membership was open to teachers, public servants, military and members of the clergy and cost $1 a year. At one time GEM had 250,000 members in Hawaii.
That was one part of the formula. The other was that GEM leased out space to businesses that ran its various departments. GEM did not have any investment in inventory. The concessionaires carried most of the risk.
"Many of Hawaii's well-known companies were GEM departments. ABC Stores, Wong's Drapery, C.S. Wo, Mid-Pacific Lumber, Kim Chow, Honolulu Sporting Goods and Hauoli were all GEM tenants." Kaya says.
"We went into the pharmacy business ourselves and didn't renew Sidney Kosasa's drug department lease. Sidney owed me a lot of thanks for that because his ABC Stores are huge today."
Kaya was working in a local furniture store in the late 1950s when GEM executive Harold Toplin walked in one day. "Harold and I were talking and found we were both University of Michigan graduates. He asked me to join GEM."
"There were no Asian managers of stores here at the time, and Harold gave me that opportunity. We opened the Kapalama GEM first, on Dillingham, in 1958."
The second store was on Ward Avenue where Sports Authority is now, in 1962. Honolulu Mayor Neal Blaisdell, Lt. Gov. James Kealoha and the Royal Hawaiian Band welcomed a crowd of 9,000 at its grand opening.
GEM operated gas stations on the corner of Ward Avenue and Auahi Street, where Wahoo's Fish Taco and Starbucks are today, and at the Kapalama GEM, where the 7-Eleven is today. Kaya remembers selling gas for 22 cents a gallon at one time.
By 1966, sales at 38 GEM stores on the mainland, England and Puerto Rico topped $350 million (about $2.4 billion in today's dollars). Membership totaled more than 1.6 million.
Sales at the two Honolulu GEM stores topped $26 million ($175 million today), prompting the opening of stores in Waipahu, Hilo, Kauai and Kaneohe. This made it the No. 2 retailer in the state, behind Sears. Shortly before the Waipahu GEM opened in 1970, the membership requirement was eliminated.
"There were 40 to 50 GEMS at its peak," Kaya said. "Denver and St. Louis were the first and second stores in 1957, and the next year we opened Honolulu. Kansas City, Los Angeles and Minneapolis soon followed."
"Most retailers in Hawaii sold an item that cost $1 or $2 before GEM. We'd sell it for $1.50 but sell four in the time they could sell one. The consumer won and we'd win, too," Kaya says.
Kaya was offered the role of company president. "I turned it down. The company headquarters was in Kansas City, and I was walking the street there and passed a guy with orange socks and a strange shirt. I thought to myself, ‘What am I doing here?'"
GEM was part of a wave of sociocultural change that swept Hawaii after World War II. "Stores were closed on Sundays when we first opened," Kaya said, so people could go to church. "We were instrumental in getting that changed."
GEM also pioneered discounting. It's hard to imagine today, but in the 1950s, state laws let manufacturers and distributors set prices for retailers. If one manufacturer in the state had a contract with a retailer to sell a product at a minimum price, no other retailer could undercut that price.
"We fought that, and it was great publicity for us," Kaya recalls. Gov. John Burns signed the Fair Trade Act in 1963 allowing retailers to set and discount prices as they saw fit.
Other discounters followed in GEM's footsteps, including Wigwam, Gibson's and Holiday Mart.
Longtime Hawaii residents may remember some of the promotions GEM held. They brought in several Hanna-Barbera costumed cartoon characters, such as Fred Flintstone, Yogi Bear, Boo-Boo Bear and Huckleberry Hound.
Tony Dow and Jerry Mathers of TV's "Leave It to Beaver" and their families came in 1962.
The flight arrival time was announced in the papers, and thousands showed up to greet them. A motorcade took them through town and to the Royal Hawaiian. They held several autograph sessions at GEM in the next few days.
By the 1980s, GEM found it hard to compete with Walmart and Costco.
Seibu of Japan bought out McInerny and GEM in the 1980s but decided to focus on its Southeast Asian businesses in 1993 and closed GEM.
Glenn Kaya is now 85 and manages the City Square and Waimalu Plaza shopping centers.
Bob Sigall, author of the “Companies We Keep” books, looks through his collection of old photos to tell stories each Friday of Hawaii people, places and companies. Email him at Sigall@Yahoo.com.